Marshall Plan

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The Marshall Plan, also known as the European Recovery Program, was a U.S. program providing aid to Western Europe following the devastation of World War II. It was enacted in 1948 and provided more than $15 billion to help finance rebuilding efforts on the continent. The brainchild of U.S. Secretary of State George C. Marshall, for whom it was named, it was crafted as a four-year plan to reconstruct cities, industries and infrastructure heavily damaged during the war and to remove trade barriers between European neighbors – as well as foster commerce between those countries and the United States.

In addition to economic redevelopment, one of the stated goals of the Marshall Plan was to halt the spread communism on the European continent.

Implementation of the Marshall Plan has been cited as the beginning of the Cold War between the United States and its European allies and the Soviet Union, which had effectively taken control of much of central and eastern Europe and established its satellite republics as communist nations.

The Marshall Plan is also considered a key catalyst for the formation of the North Atlantic Treaty Organization (NATO), a military alliance between North American and European countries established in 1949.

Europe After World War II

Post-war Europe was in dire straits: Millions of its citizens had been killed or seriously wounded in World War II, as well as in related atrocities such as the Holocaust.

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Many cities, including some of the leading industrial and cultural centers of Great Britain, France, Germany, Italy and Belgium, had been destroyed. Reports provided to Marshall suggested that some regions of the continent were on the brink of famine because agricultural and other food production had been disrupted by the fighting.

In addition, the region’s transportation infrastructure – railways, roads, bridges, and ports – had suffered extensive damage during airstrikes, and the shipping fleets of many countries had been sunk. In fact, it could easily be argued that the only world power not structurally affected by the conflict had been the United States.

The reconstruction coordinated under the Marshall Plan was formulated following a meeting of the participating European states in the latter half of 1947. Notably, invitations were extended to the Soviet Union and its satellite states.

However, they refused to join the effort, allegedly fearing U.S. involvement in their respective national affairs.

President Harry Truman signed the Marshall Plan on April 3, 1948, and aid was distributed to 16 European nations, including Britain, France, Belgium, the Netherlands, West Germany and Norway.

To highlight the significance of America’s largesse, the billions committed in aid effectively amounted to a generous 5 percent of U.S. gross domestic product at the time.

What Was the Marshall Plan?

The Marshall Plan provided aid to the recipients essentially on a per capita basis, with larger amounts given to major industrial powers, such as West Germany, France and Great Britain. This was based on the belief of Marshall and his advisors that recovery in these larger nations was essential to overall European recovery.

Still, not all participating nations benefitted equally. Nations such as Italy, who had fought with the Axis powers alongside Nazi Germany, and those who remained neutral (e.g., Switzerland) received less assistance per capita than those countries who fought with the United States and the other Allied powers.

The notable exception was West Germany: Though all of Germany was damaged significantly toward the end of World War II, a viable and revitalized West Germany was seen as essential to economic stability in the region, and as a not-so-subtle rebuke of the communist government and economic system on the other side of the “Iron Curtain” in East Germany.

In all, Great Britain received roughly one-quarter of the total aid provided under the Marshall Plan, while France was given less than one fifth of the funds.

Impact of the Marshall Plan

Interestingly, in the decades since its implementation, the true economic benefit of the Marshall Plan has been the subject of much debate. Indeed, reports at the time suggest that, by the time the plan took effect, Western Europe was already well on the road to recovery.

And, despite the significant investment on the part of the United States, the funds provided under the Marshall Plan accounted for less than 3 percent of the combined national incomes of the countries that received them. This led to relatively modest growth of GDP in these countries during the four-year period the plan was in effect.

That said, by the time of the plan’s last year, 1952, economic growth in the countries that had received funds had surpassed pre-war levels, a strong indicator of the program’s positive impact, at least economically.

Political Legacy of the Marshall Plan

Politically, however, the legacy of the Marshall Plan arguably tells a different story. Given the refusal to participate on the part of the so-called Eastern Bloc of Soviet states, the initiative certainly reinforced divisions that were already beginning to take root on the continent.

It’s worth noting, too, that the Central Intelligence Agency (CIA), the secret service agency of the United States, received 5 percent of the funds allocated under the Marshall Plan. The CIA used these funds to establish “front” businesses in several European countries that were designed to further U.S. interests in the region.

The agency also, allegedly, financed an anti-communist insurgency in Ukraine, which at the time was a Soviet satellite state.

By and large, though, the Marshall Plan was generally lauded for the desperately needed boost it gave America’s European allies. As the designer of the plan, George C. Marshall himself said, “Our policy is not directed against any country, but against hunger, poverty, desperation and chaos.”

Still, efforts to extend the Marshall Plan beyond its initial four-year period stalled with the beginning of the Korean War in 1953. The countries that received funds under the plan didn’t have to repay the United States, as the monies were awarded in the form of grants. However, the countries did return roughly 5 percent of the money to cover the administrative costs of the plan’s implementation.

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